More than a decade has passed since the “pop” of the housing bubble that left some people homeless and many struggling. In the following years, the housing market and the economy have rebounded. Furthermore, technology has changed the face of real estate in that time; yet, it’s not clear whether it will positively or negatively impact the housing market.
One of the current trends in real estate is iBuying, or purchasing homes with fixed-prices online with just the click of a button. It’s more like purchasing a shirt from the store than negotiating for a home in the traditional manner. Although iBuying can be convenient, sellers run the risk of the property not being what they expect. Purchasing a house online can also involve confusing disclosure requirements.
However, algorithms are an attempt to make the playing field a little more even. Computers process a variety of factors, including for-sale disclosures, market analysis, timing, and similar properties to arrive at a price estimate for an available home. firms that participate in iBuying use these generated estimates to provide an “instant” price for buyers who do not want to haggle.
Instant buying is still growing. For example, approximately 5 percent of homes were sold via iBuying in Phoenix in 2018, which means that most sales followed traditional routes. Experts believe that the ability to sell real estate instantly will only become more popular as the market slows down.
The investors who can afford these purchases, even smaller investors, will gain control in local markets. iBuying could allow these investors to quickly buy and sell, increasing their liquidity. On top of this, quick purchases of renal properties can generate cash flow.
These changes have great potential to change real estate by connecting sellers and buyers more easily than ever before, but there are risks. First, housing prices may initially increase, a trend that we’ve already observed over the last few years, and some people worry that this will lead to a new housing bubble where only investors can afford to purchase houses. Would-be homeowners will be forced to continue renting.
On the other hand, if new construction can keep up with increased demand, rental and mortgage prices may decrease. A new housing bubble is not yet certain.